Security for Expenses Insurance - Alternatives

Context

PIB Insurance Brokers advertised a Party Wall Insurance project as an alternative to depositing Security for Expenses in escrow.

Benefits of Party Wall Insurance

The primary benefit of this policy was that it meant that Building Owners no longer had to tie funds up in escrow as security - instead, they could simply purchase a contract of insurance and hold onto their funds.

PIB Insurance Brokers Party Wall Policy

The policy wording remains available online. Paraphrasing:

Who did it protect?

This policy protected only the adjoining owner.

Difference from Party Wall/Non-Negligence insurance

Party Wall or Non-Negligence insurance protects the building owner against liability claims for non-negligent injury or damage to a neighbour’s property. Security for Expenses insurance, by contrast, covers the adjoining owner, removing the need for funds to be held in escrow or any other form of security.

Why was it unique?

It was the only policy specifically safeguarding an adjoining owner. If the building owner became insolvent or abandoned the works, the policy remained valid.

Did it replace other insurances?

No. It was a standalone policy and did not replace normal construction or buildings insurance.

Was non-negligence cover compulsory first?

No, but the insurer could seek to recover costs from the building owner after paying a claim.

Drawbacks of Party Wall Insurance

Like all bonds and insurance policies, the primary drawback is that even if the 'peril' doesn't come to pass, the cost of the policy or bond is lost.  While there might have been a perceived benefit in not having funds tied up, the net cost to the building owner was almost certainly higher.

Party Wall Insurance

As far as we are aware, PIB Insurance Brokers no longer offer this product.